What is Piggybacking on Credit Score?
Piggybacking in the context of credit scoring is a strategy whereby an individual with a poor credit history is added as an authorized user to a credit account held by someone with an excellent credit rating. This process leads to the positive credit history of the account holder being attributed to the authorized user, effectively boosting the latter’s credit score.
How Does It Work?
When someone is added as an authorized user to an account with high creditworthiness, the positive history of the primary account holder reflects in the authorized user’s credit report. This can substantially enhance the authorized user’s credit score.
An Improved Example
Let’s say Jane wants to improve her credit score quickly. She finds a service that, for a fee, connects her to John, who has an impeccable credit history. By being listed as an authorized user on John’s credit card account, Jane’s credit score transitions from a subprime status to a B or even A rating within a short period. This improvement allows Jane to qualify for better loan terms with significantly lower interest rates, resulting in substantial financial savings over time.
Legality and Risks
Though it sounds advantageous, piggybacking raises ethical and legal considerations. While it is legally permissible when an arrangement involves family members or acquaintances, commercial transactions through third-party arrangement may carry risks and could possibly defraud lenders by misrepresenting one’s true creditworthiness.
FAQs
1. Is Piggybacking On a Credit Score Legal?
Piggybacking itself is not explicitly illegal. However, entering into a commercial transaction to be added as an authorized user may have ethical and legal implications. Always ensure transparency and legality in your agreements.
2. What Are the Risks of Piggybacking?
The key risks include potential fraud investigation and misrepresentation to lenders. Also, if the primary account holder defaults, the authorized user’s credit score may be negatively impacted.
3. How Do I Choose the Right Account for Piggybacking?
Opt for accounts with excellent credit histories and communication with the primary holder. Avoid unknown commercial services that offer piggybacking for hefty fees. Shops transparent services with credible reviews.
Piggybacking on a stellar credit account may appear as an appealing quick-fix for a high credit score. However, it carries both potential benefits and risks, and it’s imperative to proceed with caution, complete awareness, and preferably, through lawful methods.
Related Terms: authorized user, credit rating, underwriting, subprime status.
